How can you effectively monitor and adjust budget performance?

1 Establish a baseline

The first step to monitor and adjust your budget performance is to establish a baseline, which is a snapshot of your project plan at a specific point in time. A baseline includes the scope, schedule, cost, and quality parameters of your project, as well as the assumptions and risks that underlie them. A baseline serves as a reference point for measuring the actual performance of your project against the planned performance. You can create a baseline using project management software, such as Microsoft Project, or using a simple spreadsheet.

2 Track variances

The next step to monitor and adjust your budget performance is to track variances, which are the differences between the actual and the planned performance of your project. Variances can be positive or negative, depending on whether the actual performance is better or worse than the planned performance. For example, a positive cost variance means that you are spending less than planned, while a negative cost variance means that you are spending more than planned. You can track variances using various metrics, such as earned value analysis (EVA), which compares the budgeted cost of work performed (BCWP) with the actual cost of work performed (ACWP) and the budgeted cost of work scheduled (BCWS).

3 Analyze causes

The third step to monitor and adjust your budget performance is to analyze the causes of the variances, which are the factors that contribute to the deviations from the baseline. Causes can be internal or external, controllable or uncontrollable, and predictable or unpredictable. For example, an internal cause of a negative cost variance could be a change in scope, while an external cause could be a change in market conditions. You can analyze the causes of the variances using various techniques, such as root cause analysis (RCA), which identifies the underlying problems that lead to the symptoms, or fishbone diagram, which illustrates the relationship between the effect and the possible causes.

4 Implement corrective actions

The fourth step to monitor and adjust your budget performance is to implement corrective actions, which are the actions that you take to address the variances and bring your project back on track. Corrective actions can be proactive or reactive, depending on whether you anticipate or respond to the variances. For example, a proactive corrective action could be to revise the budget based on updated estimates, while a reactive corrective action could be to negotiate with the stakeholders for additional funds. You can implement corrective actions using various tools, such as change request, which documents the proposed changes to the project plan, or issue log, which records the issues that arise during the project and how they are resolved.

6 Review and improve

The sixth and final step to monitor and adjust your budget performance is to review and improve your monitoring and adjustment process, as well as your project performance. Reviewing and improving is essential to learn from your experience, identify the best practices and lessons learned, and apply them to your future projects. You can review and improve your monitoring and adjustment process using various tools, such as feedback survey, which collects the opinions and suggestions of the stakeholders, or post-project review, which evaluates the success and failure of the project and the performance of the project team.